Houston Athletics Foundation among losers in alleged Ponzi scheme

By SAM KHAN JR., Houston Chronicle

Updated 11:31 pm, Sunday, December 18, 2011

The Houston Athletics Foundation is one of many victims of an alleged Ponzi scheme run by late financial adviser and grass-roots basketball coach David Salinas. But while the assets the foundation may have lost in the scheme are significant, the impact on one of the foundation's beneficiaries, University of Houston athletics, may not be that large, according to a person involved with the foundation.

The foundation gives an average of $250,000 annually to Cougar Pride, the fund-raising arm of UH athletics, which goes toward scholarships for student-athletes. The foundation's current treasurer, Matthew Houston, said the foundation has already made its distribution this year at approximately $40,000 below that average but that it also has a goal of reaching its average via board donations.

"We are working diligently to recover our assets and operate an organization that the University of Houston can be proud of," Houston said.

Considering UH's athletic department operating budget of roughly $32 million and an estimated $3 million raised annually for athletic scholarships, the reduction won't have a tremendous impact.

"It's not a huge impact, but it does have an impact," UH athletic director Mack Rhoades said.

According to Internal Revenue Service filings reviewed by the Associated Press, more than $2.2 million of the nearly $5.1 million in assets listed by the Houston Athletics Foundation were invested in bonds that the Securities and Exchange Commission claims never existed. The SEC accused Salinas of defrauding more than 100 investors of $39 million, including millions from several high-profile college coaches.

Salinas, the founder of the Houston Select basketball program and a financial supporter of the University of Houston and Rice athletic departments, was found dead at his home in Friendswood in July. The Galveston County medical examiner's office ruled the death a suicide.

Houston, who took over as treasurer for the foundation in August in the aftermath of the incident, said the foundation's actual losses will likely fall between the $500,000 and $1 million range. The foundation invested $1.5 million with Salinas in 2001, according to Houston.

The foundation has since taken steps to guard against such circumstances in the future, such as restructuring the board of directors and rewriting the bylaws of the organization.

A court-appointed receiver overseeing the assets of Salinas' estate has collected about $11.9 million in insurance policies held by Salinas, has identified about $800,000 in unpaid loans to the Salinas estate, and has identified real property, most of which is mortgaged, held by the estate. The receiver previously set up a process by which individuals could file claims against the estate. Houston Athletics Foundation has filed a claim in hopes of recuperating some of its lost assets.

Just weeks after Salinas' death, the SEC filed a lawsuit accusing him and an associate, Brian Bjork, of selling bogus corporate bonds with purported yields of up to 9 percent. The matter remains under criminal investigation by the U.S. Secret Service.

The Associated Press and staff writer David Barron contributed to this report.